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The new CMHC

BEST OF BNN: The federal government moved forward this week on its promise to introduce greater oversight of the Canadian Mortgage Housing Corporation, the
country's largest seller of mortgage insurance.

The legislation will ensure that the financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), will formally review the
agency's activities and report back to the finance minister.

The government has also introduced changes to the covered bond market, which are securities backed by pools of underlying assets, such as mortgages.
The legislation will bar banks from using mortgages backed by CMHC as collateral when they sell covered bonds.

"The big step is formal reporting every year through OSFI…which is going to put the insurer more on par with other participants in the market
place," Finn Poschmann, Vice President of Research at the C.D. Howe Institute, tells BNN.

Poshmann says the legislation is also aimed at ensuring the growing covered bond market in Canada remains safe and avoids some of the pitfalls that
occurred in other markets.

"Overall, what they're saying here is if you're going to go to the covered bond market, bring some good secure assets, they're going to make them all
very similar vanilla products and do it without taxpayer backing -- let the market grow," he says.

And while the legislation is seen as a response to concerns about the country's hot housing market raised by both Finance Ministry Flaherty and the
Bank of Canada, Poshmann says it won't be a major disruption to the real estate sector.

"We may see a little more hesitance by the banks to issue mortgages bonds until they adjust to the new framework, so there may be tightening of
supply," he says. "But I wouldn't worry about it too much though, we have investors in Europe and especially in the U.S. that are hungry for secure
products that deliver some pretty good yield and covered bonds are an answer to that."